About the Personal Loan Calculator

What is a personal loan?

A personal loan is an unsecured installment loan that provides a lump sum of money to the borrower, repaid in fixed monthly payments over a specified term. Unlike mortgages or car loans, it does not require collateral such as a house or vehicle.

Purpose of this calculator

This calculator helps you estimate your monthly payment, total interest, and overall cost based on loan amount, interest rate, and repayment term. It enables comparison of borrowing options and helps plan repayment effectively.

Types of personal loans

• Fixed-rate personal loan: Interest rate and payments stay the same for the full term.
• Variable-rate personal loan: Interest rate may fluctuate with the market. Payments can rise or fall depending on rate changes.
• Secured personal loan: Backed by collateral (e.g., savings account, asset). Often offers lower rates but carries repossession risk if you default.
• Unsecured personal loan: No collateral. Approval and rate depend mainly on creditworthiness and income.

Fields used in this calculator

• Loan Amount: The total amount you plan to borrow. Determines the size of each payment.
• Annual Interest Rate (%): The nominal yearly rate charged by the lender for borrowing money.
• Term (Years): The total length of time to repay the loan. Shorter terms mean higher payments but less interest overall.
• Fees (optional): Origination or processing charges, either deducted from loan proceeds or added to the financed amount.
• Extra Monthly Payment (optional): Additional principal you voluntarily pay to shorten the term and save interest.

How the calculation works

Monthly interest rate (r) = Annual Rate / 12 / 100
Number of payments (n) = Term × 12
Monthly Payment (M) = P × r × (1 + r)^n / ((1 + r)^n - 1)
Where:
  P = Principal (Loan Amount)
  r = Monthly rate
  n = Total number of months
      

Advantages of personal loans

• Predictable fixed monthly payments for easier budgeting.
• Can consolidate multiple high-interest debts into one manageable loan.
• No collateral required for most loans.
• Faster approval and disbursement than secured loans.

Disadvantages

• Interest rates often higher than secured loans.
• Fees or penalties for late or early repayment may apply.
• Missed payments harm credit score and increase cost.

How to reduce cost and risk

• Borrow only what you need and can repay comfortably.
• Improve credit score to qualify for better rates.
• Choose the shortest affordable term to save interest.
• Make extra payments early when possible.

Interpreting results

• Monthly Payment: The regular payment you’ll make to repay principal plus interest.
• Total Interest: The total amount paid in interest over the term.
• Total Cost: The total of all payments made, including interest and fees.

Note: This calculator provides an estimate for planning purposes only. Actual loan offers depend on your credit profile, income stability, and lender policies.